Confidence is now at its lowest level since December 2001, according to the Business in Britain Report out this week from Lloyds TSB Corporate. One third of firms experienced a decline in sales and orders during the first half of 2005 which, when combined with falling prices and higher costs, resulted in more firms seeing profits decline than increase. During the past six months, 41 per cent of firms saw profits fall, compared to 28 per cent that increased profits. This slump is consistent with the slowdown of 0.9 per cent in manufacturing output seen across the UK in the first quarter. Firms’ investment spend is at its weakest level for 18 months and expenditure and recruitment plans have been scaled back. Since January, a quarter of businesses cut back on investment and one fifth expect to slash capital expenditure further during the second half of the year. The survey also shows that during the past six months a quarter of Surrey firms had to cut prices and one fifth expect to increase prices during the next six months. The survey’s unique confidence index is based on expectations for order books, sales and profitability over the next six months and is the percentage balance of those expecting an increase minus those expecting a decline. The index was 19 per cent a year ago, 25 per cent at the start of the year but has fallen to just eight per cent in this survey — the lowest since December 2001. Andy Lee, relationship director for Lloyds TSB Corporate said: “Confidence among UK firms has fallen sharply since the start of the year. “With oil prices having risen by 60 per cent year-on-year, many firms have suffered from higher production costs.“